TOKYO: Tokyo shares plunged more than five percent Tuesday, extending a global equities bloodbath as a sharp rise in the yen hammered exporters and fears over the state of the global economy fuelled a rush to safe investments.
The eye-watering fall -- the steepest in percentage terms since June 2013 -- came after US and European bourses tumbled, sparked by worries about the financial sector as global growth slows.
Leading the losses in Tokyo were were Japan's biggest banks and major brokerage Nomura tanking, while top automaker Toyota plunged more than six percent.
The benchmark Nikkei 225 index dropped 5.40 percent, or 918.86 points, to close at 16,085.44 and the Topix index of all first-section shares dived 5.51 percent, or 76.08 points, to 1,304.33.
Underscoring the panic, the dollar slipped below 115 yen, hovering around its lowest levels since late 2014. It fetched 114.73 yen in the afternoon.
Investors tend to buy the Japanese unit as a safe bet in times of uncertainty or turmoil. But a stronger yen is a negative for Japanese exporters and knocks demand for their shares.
Also Tuesday, the yield on Japan's 10-year government bond dropped below zero for the first time ever as panicked traders ran for cover.
The decline in the Japanese bond yield -- effectively a bond's return if held to maturity -- reflects rising demand for the rock-sold investments.
"We had a bubble in people's expectations of the power of central banks. And now we're seeing that bubble burst," Soichiro Monji, chief strategist at Daiwa SB Investments, told Bloomberg News.
"Investors are pricing in the fact that central banks can no longer control markets.
"That became apparent after the Bank of Japan's last stimulus, and now a similar view is strengthening about the European Central Bank."
Makoto Sengoku, a market analyst at Tokai Tokyo Securities, offered a grim assessment: "There was nothing good about the market today. And I think there is going to be more turbulence ahead."
Japan's central bank shocked markets last month by adopting a negative interest rate policy -- intended to ramp up lending to people and businesses in order to kickstart the economy and fend off deflation.
The move sparked a surge across global financial markets and sent the yen tumbling, but the good times quickly faded.
In Tokyo, financial giant Mitsubishi UFJ plunged 8.73 percent to 491.2 yen. Rival Sumitomo Mitsui Financial Group dived 8.97 percent to 3,106 yen, Mizuho Financial Group fell 6.22 percent to 170.3 yen, and Nomura dived 9.06 percent to 510 yen.
Toyota slumped 6.12 percent to 6,154 yen and Uniqlo operator Fast Retailing, a market heavyweight, dropped 6.27 percent to 32,870 yen.
Crude prices staged a rebound in Asia after US benchmark West Texas Intermediate fell back below $30 a barrel on Monday.
But petroleum-linked shares in Tokyo still suffered, with energy explorer Inpex falling 6.35 percent to 965.5 yen, while JX Holdings dived 4.37 percent off to 452.0 yen.
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